“Today’s jobs report is just an example of [how] we have a long way to go,” Neel Kashkari told Bloomberg Friday, after April payrolls missed every estimate and the unemployment rate ticked higher.
To put things in context, the most pessimistic guess from 77 economists surveyed was around 700,000. The actual headline print undershot that by 434,000.
“Let’s not prematurely declare victory,” Kashkari said.
No. Let’s not. Because April’s underwhelming gain means the US labor market remains more than 8 million jobs short of pre-pandemic levels of employment (figure below).
While 331,000 (the number of additions in leisure and hospitality) sounds like a big gain, it arguably pales in comparison to what one might have expected to see given the pace of vaccinations in the US and the push to reopen the services sector.
The number of job losers classified as “permanent” was essentially unchanged in April. That total remains more than two million above pre-pandemic levels (figure below).
The number of jobless 27 weeks or more remained perched around 4.2 million, or roughly 43% of the total unemployed.
Invariably, some will suggest that April’s large downside miss is evidence to support the contention that generous unemployment benefits are discouraging people from returning to work, although I’d note that jobless claims just fell to another pandemic low.
I’ve said this before, and I’ll probably say it another several dozen times this year: It never seems to occur to employers that if you can’t fill positions, it may be because you’re not paying nearly enough.
Note the emphasis on “nearly.” If you’re an employer, you need to make prospective employees “an offer they can’t refuse,” and I don’t mean having Luca Brasi preside over job interviews.
For years, it’s been about paying employees the lowest possible amount with the least possible benefits in order to protect margins and profits. That’s understandable — to a point. But like anything else, there’s a threshold beyond which it becomes absurd and untenable.
Yes, government assistance during the pandemic has completely replaced some income streams and it’s almost a truism that the more money you give people for free right now, the less likely they’ll be to rush out tomorrow (or next week) to take a job serving (or cooking) bacon at Waffle House. But that only applies for so long. Biden didn’t send everyone $50,000 and the unemployed aren’t getting rich by not working (any well-timed Dogecoin trades notwithstanding).
The fact is, most people won’t turn down a succession of good job offers if those offers promise an opportunity to earn a decent living with dignity. For employers, the “decent” and “dignity” parts are challenging, because it means offering workers in traditionally low-paid occupations what, for many pro-business lobbies, is an unthinkably attractive compensation package.
But so be it. Since the 80s (at least), capital has had the upper-hand on labor. Labor’s power has steadily declined. Now, the tide is turning. Companies will either adapt, or face worker shortages. You can automate. You can innovate. And you can try to squeeze more out of your existing employees. At some point, though, you’ll likely have to hire at least some workers for more money and provide them with more generous benefits than you’d ideally like to. Here’s how I put it last month:
This discussion is almost always one-sided. It’s always about whether government is paying the poor and/or the jobless “too much” to stay home. It’s almost never about whether employers are offering to pay prospective workers too little to incentivize them to take a job.
Try this: Offer to pay the baristas and the warehouse workers and the shelve-stockers the median US household income plus a reasonable benefits package and watch how many people line up down the street to make coffee, lift boxes and stock shelves.
If, on the other hand, we keep posting signs on the door that, stripped of the euphemisms, simply offer to put people to work for a paycheck that leaves them no better off than they would have been otherwise, who are the silly folks in that equation? Is it the people who laugh at the notion that they should acquiesce to making your expensive lattes all day just so they can proudly say they’re “employed and poor” as opposed to “unemployed and poor”? Or are we the silly ones for making such a ridiculous offer in the first place?
I think those passages are especially germane in the wake of April’s payrolls miss, and you’re encouraged to consider the above when you hear commentators blaming “lazy” workers and government handouts rather than a corporate mindset that’s struggling to adapt to the post-pandemic reality.
And it’s more than just a capital versus labor clash. “We think labor market softness is more of a supply issue than a demand issue at this point,” ING’s James Knightley said Friday, noting a trio of consecutive record high readings for small businesses reporting job openings they can’t fill with the vast majority citing a dearth of “qualified” applicants.
That points to a skills gap which needs bridging or else to the possibility that America isn’t training people for the jobs that actually exist in the economy. Maybe free community college (which is part of Biden’s American Families Plan) would help.
ING’s Knightley also cited “obvious” constraints for parents whose “ongoing child-care issues surrounding home schooling” are forcing them to stay home “rather than go out to work.”
Finally, note that there are legitimate concerns among small businesses regarding how much they can feasibly pay new employees (or old employees they’re now trying to rehire). Not every company is Coca-Cola.
For small- and midsized businesses that nearly went under during the pandemic, it’s not as simple as saying “Well, the world has changed, so we’ll just pay more.” The money might not be there. And maybe the line of credit with the local bank isn’t either.
“The extra financial inducement required to attract potential staff may well be putting a strain on companies that have struggled through the pandemic,” Knightley went on to remark.
I’ll close as I sometimes do when I’m prepared to unequivocally assert the veracity of my assessment versus any competing accounts you may read: Above are the facts — everything else is propaganda of one sort or another.
repeating H here in case we’ve all forgotten (easy to do) … there are actual human beings, lives, livelihoods and social well being behind all of those numbers, ratios, percents and inferences … real human suffering.
Nobody seems to have overtly factored this into the situation but millions of people forced to stay home as a result of closed schools or because their employers have forced them to work at home, plus those out of work entirely but still getting some kind of benefits, all have one thing in common. They have received a stealth raise because they no longer pay child care. My daughter was paying $300/month for before and after school care for her 5th grader required when she and her husband had to commute to work. Now they get to enjoy a $3500 raise because they don’t have to pay child care. That makes their child’s braces free with money leftover. Some households with several children in various forms of child care were regularly paying $5000 or more that care, enough to soak up much of a working wife’s pay before the pandemic. To get some of these people back to work, or even back to the office, employers need to cover that lost “raise” on a pretax basis. For a person saving say 4k in childcare, that’s something like $5200 on a before-tax basis over and above a proposed salary to encourage someone who needs childcare back to the workforce, especially if the husband or other family member in the household has a modest job. The longer stingy employers go before they start to take some of that four trillion cash horde and start to offer reasonable pay to the bottom quartile, at least, a living wage which overcomes the childcare “raise” prospects have been enjoying. Remember people with no income can’t support a “consumer” economy.
A related quirk here involves medical care. Workers who work strenuous or repetitive motion jobs need healthcare. I employ a gig worker to clean my house. She has been out of work for eight months and gets no benefits because, like many in her situation, the job she lost was through a temp agency. Such jobs, when lost, carry no unemployment benefits because she is still technically employed by the temp agency who just happens to have no available openings for work. In addition, when she got the job she had she could have had a better one ($11.50/hr — try to live on that great a job). Trouble is, the better job ends her Medicaid eligability so she must find health insurance. Keeping her $9.50 temp agency supplied job at least gave her some access to healthcare. This woman with no job takes care of her disabled bi-polar older brother, and three other family members, one of whom has a decent job but is moving out and taking her salary with her.
Everyone out there who thinks millions are sitting around on their butts soaking up benefits from our “lefty” government need to get out more, meet some of the real people living on thousands of hopeless streets across the country. These are people who must worry daily about getting evicted, stuck eating crap food because they can’t afford Quinoa bowls or Kale smoothies or some other fad “health food.” The bottom third to half of our great country unfortunately hasn’t been as lucky as the rest of us. They can’t pay for healthcare or child care, good food or stable housing. And if they take a job they may actually incur more expenses than if they don’t. What a country!
Those of us who have been lucky need to stop begrudging those who can’t even think about getting the basics required for life. Being part of a civil society means sharing with those less fortunate than ourselves. Quit judging and start sharing. Judging is God’s job, remember? Our job is helping our fellow humans when they are down. That was Jesus’s job, remember?
Sorry for the rant.
Mr. Lucky,
No need to apologize whatsoever.
There are so many vectors moving simultaneously that it’s really hard to get a clear view of where things are really going. And it goes without saying these days that every market is distorted (both by design and by consequence). Why should the labor market be any different? Of course I agree with Professor H here.
Another critical fact to consider, which I’ve been tracking through the year, is that 1/3 of small businesses in the US may have closed permanently. The best data sample I’ve found on this is via tracktherecovery.org. The cable financial news narrative (cheerleading) was never going to connect with this reality. If small businesses provide 50% of employment, and 33% have closed, where does that leave the real economy? Qualitatively, most of these jobs are also more “dignified” than being exploited by a multinational corporation in a job with no personal agency at poverty level minimum wage in the richest country in the history of the world. Imagine a middle-aged small business owner who just had all the accumulated equity of their business wiped out by a black swan. Are such people going to take a major life risk again, like starting another business with sweat equity and personally-guaranteed loans and “trusting this system” enough to expect it to pay off profitably?
The country needs the young people to step in and pick up this torch with enough ambition and risk taking to change this dynamic. Unfortunately, most of them are drowning in student debt and think the system is rigged (they’re right), so I’m not exactly expecting it.